by Senator Jane Kitchel, Danville As I reflect on my twenty years serving in the Vermont Senate, there are areas where we made great progress but complex challenges loom.
I take pride in getting the State’s fiscal house in order – reserves have been built, we’ve addressed pension liabilities, and we produced a balanced budget every year. Legislation to enact one of the most robust childcare programs in the country survived a veto. We implemented tax policy changes that keep millions more in Vermonters’ pockets.
We improved the State’s transportation infrastructure. And while the modest inflationary increase in DMV fees has been heavily scrutinized (e.g. $3.50 yr for a license), it finances Vermont’s transportation system and draws down federal dollars which save Vermont taxpayers' money. Since 2020, we’ve appropriated nearly $300 million for housing development resulting in over 5,000 new affordable housing units throughout Vermont. Yet political messaging has overshadowed this progress.
PROPERTY TAXES
After the 1997 Vermont Supreme Court Brigham decision, Vermont moved to a property tax structure, requiring the Legislature to set a statewide rate based on locally-approved spending. Since 2018, sales tax revenues and 25 percent of rooms and meals taxes have been dedicated to the Education Fund. When school spending increases exceed normal growth of these non-property tax revenues, the gap is funded by an increase in the property tax and voters are de facto increasing their property taxes.
Although school spending is approved locally, the Legislature must set the statewide property tax rate to reflect this local spending. The Legislature then takes the blame. This local spending authority with a State revenue responsibility has created a serious disconnect between local school budget spending decisions and statewide property taxes. It is straightforward – the greater the approved spending locally, the greater the revenues needed at the state level.
The latest study by Picus Odden & Associates estimates that Vermont is currently spending $400 million more than what is needed to adequately fund the K-12 education system. S&P reports that if the rate of spending is not slowed, it could put the State’s bond rating at risk. Vermont has high per pupil spending, declining enrollment, costly administrative overhead, overbuilt or antiquated infrastructure, and projections do not show trends reversing.
I hope solutions are proposed this coming year that provide fiscal sustainability and produce solid educational outcomes. It will require strong leadership as changes will likely be the subject of opposition.
INCOME TAX BENEFITS
The Legislature has implemented several tax changes that saved Vermonters money, including:
- Social Security income tax exemption (approx. 7800 households): Vermont filers with an adjusted income of less than $50,000 for single filers and $65,000 for married files pay zero tax on their Social Security income.
Military and civil service retirement income tax exemption on the first $10,000 (approx. 3000 households)- Child and Dependent Care Tax Credit (approx. 3,000 families) with an average tax credit of $261
Refundable Child Care Tax Credit of $1000 per child aged five or younger (approx. 34,000 children)- Property Transfer Tax exemption on primary residences on the first 200,000
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Medicare Savings Plan which will save seniors approximately $2000 per year
SUPPORTING VERMONT’S FAMILIES, THE WORKFORCE AND ECONOMYThe Legislature’s investments have made higher education more accessible to Vermonters. 802 Opportunity Grants are providing approximately 2000 students with two years of free tuition at the Community College of Vermont. Tuition assistance has been directed to careers in health care, the trades and other critical non- degree programs.
For years, parents and employers highlighted the need for affordable childcare. The average cost for a Vermont family with two young children has been over $26,000 a year. Childcare workers have not been paid competitive wages, turnover has been high, and many programs have closed, creating a provider shortage and putting a strain on Vermont’s families and the workforce.
Revenues were required to adequately address this crisis. A payroll tax of less than one half of one percent (.44%) was implemented to be split by employers (.33%) and employees (.11%). For a full-time median wage employee that equates to $3.15 per week (employer) and $1.05 per week (employee). As a result, a four-person family with an infant and preschooler enrolled in full-time childcare can save $325 a week on average and over $16,000 a year.
BUDGET LESSONS
Vermont’s experience with pension underfunding demonstrates the painful long-term fiscal impacts of resorting to short-term budgetary expediencies. In 2022 the Legislature enacted a pension bill that improved the financial security of our public servants in their retirement. The legislation was vetoed by Governor Scott but overridden unanimously, representing one of the few times in Vermont’s history every Democrat, Republican and Independent voted to override a veto.
By addressing years of underfunding, we are stabilizing our pension systems, improving the State’s credit rating, and honoring our commitments to teachers and state employees.
Raiding reserves and using one-time revenues for ongoing spending obligations is not sound budgeting. The budget committees have strongly held to this principle. Basing decisions on what one hopes will happen is perilous. Priorities must be clear as requests always far exceed available revenues. Making funding decisions is not an easy or popular task. Lastly, be very cautious about adding new spending while simultaneously underfunding core government functions.
I am leaving public service after 55 years – 35 years in the Executive Branch and 20 in the Legislative Branch. It has been the privilege of a lifetime for me. I know that I have been described in the press as one of the most powerful Legislators in the State House. Be that as it may, like Cincinnatus who left power behind to go back to his farm it is time for me to do the same.